THE PRESIDENT'S BUDGET: THE PROPOSAL

THE PRESIDENT'S BUDGET: THE PROPOSAL; PRESIDENT UNVEILS $1.96 TRILLION PLAN THAT TRIMS TAXES

By RICHARD W. STEVENSON

Published: March 1, 2001

WASHINGTON, Feb. 28—
President Bush today proposed a $1.96 trillion federal budget for next year that would cut taxes, increase spending on education, medical research and the military but scale back corporate subsidies, health care grants for poor areas, agricultural research and a host of other programs.

Mr. Bush's tax and spending framework, his first detailed statement of priorities, immediately drew attacks from Democrats. They said the president's budget would provide a tax-cut windfall to the wealthy while raiding money needed to keep Medicare healthy and requiring cuts in the Departments of Agriculture, Commerce, Energy, Interior, Justice, Labor and Transportation.

But Mr. Bush said his plan would prudently restrain the growth of government spending and provide the money needed to address issues he considered priorities.

At the same time, he repeated his case that the projected federal surplus of $5.6 trillion over the next decade made his $1.6 trillion tax cut in the same period affordable, even after going a long way toward eliminating the national debt and setting aside money to create private investment accounts in Social Security.

Under his plan, Mr. Bush would begin phasing in reductions in the income tax rate and other provisions of his plan next year. But he has signaled that he would support efforts in Congress to begin phasing in the tax cut this year.

''The surplus is not the government's money,'' Mr. Bush said in Omaha today in the first day of a two-day trip to sell his tax cut and budget plan. ''The surplus is the people's money. And I'm here to ask you to join me in making that case to any federal official you can find.''

After six years in which President Bill Clinton's budgets were declared dead on arrival by the Republican majority on Capitol Hill, Republicans said Congress would take Mr. Bush's proposal seriously as it began drawing up its own spending plans.

Republican leaders acted quickly to give Mr. Bush's tax plan some political momentum, saying the House Ways and Means Committee would take up his proposal to reduce income tax rates on Thursday.

But even some Republicans acknowledged that Congress would find it difficult to cut programs, especially at a time of growing surpluses. And Democrats sought to reshape the budget by arguing that Mr. Bush's plan relied on money that was supposed to be off limits: $526 billion over the next 10 years in temporary surpluses from one division of the Medicare system.

Most members of both parties in Congress have agreed that the Medicare surplus should be off limits for new spending or tax cuts, a restriction rejected by the administration.

''His budget framework begins to tell the story that in order to enact his tax cut, something is going to have to give,'' said Representative Richard A. Gephardt of Missouri, the Democratic leader in the House. ''And in this case, that something is the soundness of our economic future and the immediate needs demanded by the budget.''

In presenting his budget, Mr. Bush cast himself not as an ideological warrior in the mold of Newt Gingrich, who as speaker of the House in the mid-1990's led an effort to slash the size and influence of government, but as a pragmatic manager of the nation's resources.

He proposed an increase of 4 percent, or $25.7 billion, in spending on general government programs outside of Social Security and Medicare, to $660.7 billion for the fiscal year starting Oct. 1 from $635 billion in the current fiscal year.

That increase would be slightly above what it would cost for the government to keep up with rising costs, but below the rate of increase in the past several years, including last year's increase of 8.6 percent.

And although Mr. Bush would seek to slow the growth in spending on Medicare, long a target of conservatives, he also proposed spending $156 billion over the next decade to add a program that would help retirees pay for prescription medicine.

The broad numbers obscured the ways in which increases in some areas were offset by cuts in others.

The Pentagon's budget would increase by $14.2 billion, to $310.5 billion. Education would get an additional $4.6 billion, bringing the total to $44.5 billion. The State Department's budget would increase $1.2 billion, to $23.1 billion. Despite having its overall budget cut, the Energy Department would get an additional $120 million next year for a program to help low-income homeowners insulate their houses.

But the increases in those areas and others would be largely offset by cutbacks elsewhere.

Eight of the 15 big cabinet-level departments would see their budgets decline in dollar terms, and some of the smaller agencies, like NASA, would barely keep pace with inflation. Even within some departments that would get an overall increase, some programs were slated for cutbacks or elimination.

Mr. Bush's 207-page budget document did not specify where all of the cuts would be made, but it provided some examples.

The Agriculture Department would lose $44 million for construction of research laboratories. The Commerce Department would suspend, pending a review, one of Mr. Clinton's initiatives, the Advanced Technology Program, which subsidizes research by corporations.